How to Develop a Successful Strategy for Your Loyalty Program in 3 Simple Steps - Step #3: Choosing Your Tactics and Loyalty Tools
The Third Step of Your Strategy Development – Determining How You Want to Reach Your Objectives!
Written by Stephanie Patchev, PhD
March 17, 2020 | Reading Time: 19 Minutes
What You Can Learn From Konstanze Klosterhalfen About Objective-Driven Tactics for Your Customer Loyalty Program
A successful runner doesn’t just take off sprinting at the start line
Konstanze Klosterhalfen, German medium and long-distance runner, doesn’t simply start running. She has a vision. She is clear about her own deeper motivations. She is fully aware of her physical constitution and capacities. For each run, she knows exactly which goals she wants to reach and which tactics she will use to get there
Her strategic preparation has paid off in a big way: She holds the German record for the 3000- and 5000-meter distances. Along with 9 gold medals at the German Championship, she won the bronze medal in the 2019 World Track and Field Championships in Doha and, at the age of 23, she already counts among the world’s greatest athletes.
Take a page from her book – invest in a sophisticated strategy before you sprint ahead with the design of your loyalty program!
You already have a large part of this strategic work in the bag:
- Using our Guide Part #1 you have clarified the “physical constitution and capacities” of your business with the help of a status quo analysis.
- In Part #2 of the Guide, you have clarified the objectives you want to achieve with your customer loyalty program.
In Step #3, we will now focus on the “how”. How do you want to get there? Will you take off at a fast pace right away? Do you start with a relaxed pace and gradually accelerate? Or will you adjust your speed over the course of your run?
Which Tactics and Strategic Tools Will I Employ to Reach My Loyalty Program Objectives?
We won’t, of course, be able to advise you concretely on your tactics (if you would like a personal consultation, please feel free to contact us!). What we can do, however, is demonstrate an array of valuable examples that can serve as an inspiration as you define your tactics.
To this end, we have taken four possible customer loyalty program objectives from our Guide Part #2 and addressed each of them for you, using 4 strategic steps:
- Your Situation: A summary description of what your current situation might look like.
- Your Objective: We then translate this starting point into an example of a strategic objective.
- Your Tactic: In a third step, we will demonstrate which tactics you could employ to achieve your objectives!
- Your Loyalty Tools: Last but not least, to implement these tactics, we give you an overview of the loyalty tools available to you through a state-of-the-art customer loyalty program.
So, let’s get started!
Success Story 1: How You Can Develop (And Use) a Deep Understanding of Your Customers Using 360° Data
At the moment, you know very little about your customers: neither who your customers are, nor what interests or motivates them, or how and over which channel you can best reach them.
You want to know more about your customer. As a fundamental objective for your benefits program, you decided to collect as much informative data as possible, and thus cultivate a 360° understanding of your customers.
Your Tactic: UNDERSTAND
Using your customer loyalty program, you have access to structured data on all the important touchpoints between your customer and your brand. You can, in turn, analyze such data in a targeted manner to create an in-depth understanding of your customer segments. Effective, data-driven and personalized marketing, as well as an authentic company orientation towards customer centricity, will be a breeze!
Loyalty Tools That Can Support This Tactic
An irresistible reason for you customers to allow data collection and use (opt-ins):
By offering an “irresistible” benefits package, your loyalty program gives your customers a convincing reason to allow data collection and analysis.
Technology and infrastructure which enables data collection:
A state-of-the-art customer loyalty program, automated through the right technology, enables you to collect relevant interactions and transactions: online (e.g., in your online shop, bookings website, reward shop, and emails); offline (i.e., point of sale); or mobile – be it through your own channels or on social media.
A technology, which enables targeted use and evaluation of your data:
Of course, an abundance of data alone won’t bring you an added value. Utilize the right technologies to draw valuable knowledge from this “gold mine” AND then put this knowledge into use profitably (e.g. for effective personalized communication, efficient direct marketing campaigns, data-driven optimization of price and promotion strategies, product development and optimization, and much more).
Success Story 2: How You Can Communicate Directly With Your Customers and Thus Bond Them to Your Brand
At the moment, you cannot communicate directly with your customers, you cannot exchange ideas or receive valuable feedback from them. This might be because other than the cash register, you haven’t been able to identify other touchpoints (example case: retail), or because you have no direct contact point with your end customer at all (example: B2B, manufacturer/ three-stage distribution process with no direct end customer contact).
You want to build a direct relationship with your customers and establish a one-on-one communication channel.
Your Tactic: ENGAGE
Your customers are addressed with relevant messages using the right channels (online, mobile, offline) at the right time; the opt-ins, contact details and 360° customer data required for this are provided by your benefits program. In this way, you have enabled relevant and personalized one-on-one communication, which shows appreciation, interest and respect. This elicits a positive reaction from your customers. You offer your customers a wonderful, unique user experience and also bond them emotionally to your brand. You are also allowing your customers to co-create your brand, through the active engagement in the business optimization and innovation process.
Loyalty Tools That Can Support This Tactic
A strong benefits package convinces your customer to register and to allow the data collection and personalization via your loyalty program – making one-on-one communication a reality.
You now have the contact data from your customers and can build direct communication channels with them: whether by email; through occasional mailings; through your online presence, which you can personalize; or mobile forms of communication (e.g., mobile apps, push notification or SMS).
Status Level & Segmentation:
Based on the 360° customer data (e.g., demographic data and transactions) you segment your customer base in a suitable way and speak to these customer groups (or status levels) individually.
Communications content you can now optimally adjust to the interests and needs of your customer segments – thus augmenting their emotional connection with your brand.
Positive Communication Reasons (“Springboards”):
Through your loyalty program, you have a plethora of positive reasons at hand to stay in regular contact with your customers: For example, you can congratulate them on newly acquired benefits, inform them of a reward that will be available very soon (e.g. with the next booking or purchase), or surprise them with a nice gift on their birthday.
Targeted Promotions and Campaigns:
An additional effective form of personalized communication within your loyalty program is through promotional campaigns. Here, you use the 360° data acquired through your loyalty program to incentivize desired behaviors (transactional and non-transactional) in relevant customer segments.
Success Story 3: How You Can Create a Real Added Value for Your Customers and a Unique Selling Point for Your Business
You are under considerable pressure from your competitors and the new digital players who are suddenly entering your business field. Perhaps you have a highly fluctuating customer base and worry that your customers could switch to your competition any time.
You naturally want to convince your customers to continue purchasing from you and to not churn to the competition. In short, you need a strong unique selling point and a benefits package that offers your customers added value/ a convincing comparative advantage.
Your Tactic: DELIGHT
Make your customers feel real appreciation and priority in exchange for their loyalty. Ensure that they feel respected and understood. Provide them with a relevant, personalized benefits package that demonstrates your gratitude for their trust. With your customer loyalty program, you can create an experience of community and belonging. Your customer is now a part of something great, fun and inspiring.
Loyalty Tools That Can Support This Tactic
Program Membership & Personalization:
We have already touched on both of these tools. You can use them to make your customers feel that they are a part of a special community and, in your eyes, real VIPs to whom you “devotedly” and continuously demonstrate your appreciation.
Virtual Currency (Earn & Burn):
In exchange for their loyalty, your customers receive a “merit” in the form of a virtual currency (e.g. points), which they can then redeem for great rewards. Here, in contrast to discounts or cash-back, you are appealing to the hunter-gatherer instinct of your customers. Their growing point accounts stimulate a gratifying feeling of “I earned this!”
Additional Benefits and Rewards:
Your bonus program can offer your members practical and valuable additional services (“privileges”, to which “normal” customers have no access such as free delivery, shorter wait times in customer service, and access to VIP events).
Furthermore, relevant rewards (free products or services which are made available through a defined redemption mechanism) can add an absolute “wow factor” to your benefits package. Rewards, which address the individual deep wishes and dreams, have the potential to establish a truly emotional customer bond! Businesses who rely on these emotional connections can inspire and succeed.
Surprise & Delight Elements:
Surprise elements can take the satisfaction of your customers to another level. The more personal, sincere, relevant and unusual your Surprise & Delight elements are, the bigger the wow effect. If you can blow your customer away, the excitement can result in a word-of-mouth effect and even a social media buzz!
Focus on the kid in all of us, and integrate gamification elements into your loyalty program. Fun is a major success factor in exciting your customers.
Success Story 4: How You Can Motivate the Desired Behavior in Your Customers
At the moment, you have few or no means to influence the behavior of your customers. Whether it’s purchase behavior or non-transactional behavior (e.g. product reviews), you have little influence on whether your customers will engage in the desired behavior.
You want to motivate a certain behavior in your customer. That means you have to offer them the necessary incentives to elicit the desired response. For example, you may want your customer to buy more or more of a certain product group (transactional behavior). Or, you would like your customer to contribute to your brand awareness by sharing his experience with your products over social media. You might also desire feedback on your services in the form of test reports or participation in surveys (non-transactional behavior).
Your Tactic: INCENTIVIZE
Take advantage of the highly efficient, data-driven incentive-, promotion- and direct marketing- engine offered by your loyalty program! Incentivize and drive the desired behavior from your customers by putting together a relevant and personalized benefits package. Your loyalty program offers your customers a place where they and their opinion and feedback are appreciated, and where their loyalty and engagement is rewarded and actively incorporated in the innovation and optimization process of your brand.
Loyalty Tools That Can Support This Tactic
With the help of loyalty incentivization tools, you can effectively motivate your customers to practice the desired behavior through a convincing added value/ benefits package. To this end, there are 6 typical loyalty program incentivization strategies available to you: additional services (“privileges”), basic incentivization (e.g. virtual currency earn & burn), promotions, status level, surprise & delight and rewards.
One-on-One Communication & Personalization:
Based on 360° customer data, your bonus program enables you to engage in within your benefits program.
As you can see, the abundance of possible tactics and tools offered by your customer loyalty program to help you reach your business objectives is massive! We very much hope that our examples can inspire you as you define your own tactics and strategic loyalty program tools.
Last but not least, we come to a valuable final exercise – in other words, the “Grand Finale” in your strategy development: The formulation of your loyalty program vision and mission!
The ”Grand Finale”: The Definition of a Vision and Mission for Your Customer Loyalty Program
Remember the key learning from Konstanze Klosterhalfen from the beginning of this article? A successful runner doesn’t just take off sprinting. Konstanze always has a clear vision, a heartfelt mission and a bulletproof plan.
Like Konstanze Klosterhalfen, you have also completed an intensive strategic preparation: You know your “physical constitution and capacities”, you are clear about your objectives and have now defined the tactics that you want to use to reach them.
As the “grand finale” we now recommend condensing all of this strategic work into an inspiring vision & mission statement for your loyalty program. When you have completed this, you are optimally prepared: You can “sprint off” powerfully into the next steps of your loyalty project while always keeping your big picture and your underlying motivations in mind.
The vision summarizes the ideal result or the ideal state in a distant future – even if the ideal is hardly possible or extremely difficult to achieve. The powerful wording is intended to inspire and unite, allowing both internal and external stakeholders to identify with the major, overarching objective of the loyalty program and to be intrinsically motivated to support this objective.
The mission expresses how the vision will be realized in a concise manner. It is always in tune with the central values of the business and the brand. The goal of the mission is to steer the action of relevant internal and external players harmoniously in the right direction.
A sample customer loyalty program mission / vision from the hotel industry (Voila Hotel Rewards):
To be the largest and most respected frequency guest program, worldwide.
To provide select independent hotels and groups with a global loyalty solution that allows them to compete effectively and profitably.
Entrepreneurial, Trust, Global Thinking, Excellence.
- This mission statement does a very good job of covering the internal target groups of the program (independent hotels and hotel groups).
- We would also recommend expanding the mission statement to include the “external” target groups. So, in this example, dive deeper into the customer level and define what the hotel guest should feel, think and do as result of being a member of the Voila Hotel Rewards program.
On Your Mark.... Get Set…
Congratulations: the strategic basis for your customer loyalty program is complete! If you’ve been following our Enterprise-Guide, you now have a successful strategy in the bag, which is the key building block for the design of a powerful customer loyalty program.
Here on our Loyalty Insights Blog, we will soon be providing you with further helpful tips and tricks as to how you can now proceed with the design of your loyalty program – building on your strong strategic foundation! A detailed guide is already in the works – sign-up to our newsletter to be one of the first to read about it!
Off we go! 😊
About The authors
Stephanie Patchev, PhD
formerly Content Specialist | Loyalty Prime
Stephanie is truly passionate about outstanding, well-researched content that inspires people. With her background in Neurosciences, she has a deep understanding about the bio-psychological basis of customer behavior and customer loyalty.